Why Datadog Stock Tanked After Q1 Earnings?

Datadog, Inc DDOG stock dropped after it reported its quarterly results on Tuesday.

The company clocked fiscal first-quarter revenue growth of 27% year-on-year to $611.3 million, beating the analyst consensus estimate of $591.3 million.

Adjusted EPS of $0.44 beat the analyst consensus estimate of $0.35. 

As of March 31, 2024, Datadog had 3,340 customers with an ARR of $100,000 or more, increasing 15% Y/Y.

The adjusted gross margin expanded by 300 bps to 83%. The adjusted operating margin increased by 900 bps to 27%. 

Datadog held cash and equivalents of $2.8 billion as of March 31, 2024, generating $186.7 million in free cash flow.

The company announced that Amit Agarwal will depart as President, after which he will join the company’s board. He remain in his role as President until the end of 2024.

Datadog announced the general availability of IT Event Management to AIOps capabilities in Q1. With Event Management, Datadog intelligently consolidates, correlates, and enriches event alerts from Datadog and third-party tools into one consistent view so teams get the full context of an incident and can proactively discover, understand, and resolve issues.

Outlook: Datadog expects second-quarter revenue of $620.00 million – $624.00 million versus the consensus of $620.62 million. It projects an adjusted EPS of $0.34 – $0.36 versus the consensus of $0.35.

Datadog expects fiscal 2024 revenue of $2.59 billion – $2.61 billion (prior $2.555 billion-$2.575 billion) versus the consensus of $2.58 billion. It projects an adjusted EPS of $1.51 – $1.57 (prior $1.38 – $1.44) versus the consensus of $1.45.

Datadog stock gained 46% in the last 12 months. Investors can gain exposure to the stock via WisdomTree Cybersecurity Fund WCBR and TrueShares Technology, AI & Deep Learning ETF LRNZ.

Price Action: DDOG shares traded lower by 10.20% at $114.04 at the last check Tuesday.

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